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Howden Re flags rate moderation with market at 'critical juncture'

Howden Re says June property catastrophe reinsurance renewals have moderated following rate increases in the past two years, but market participants remain cautious. 

Buyers and sellers engaged early for the June renewals as buyers targeted better terms and conditions, and risk-adjusted property catastrophe reinsurance rates on line averaged 5% lower, within a typical range of 7.5% to 2.5% lower. 

“The reinsurance market is at a critical juncture,” Howden Re head of industry and strategic advisory David Flandro said. “While the recovery of dedicated capital and increased capacity signal a potential softening of rates, the forecast active hurricane season and other market pressures could counteract these trends.” 

Strong capital inflows into insurance-linked securities (ILS) have increased capacity at the top of reinsurance programs and led to rate reductions at higher layers of cover. 

The ILS market has seen more than $US3 billion ($4.5 billion) of issuance covering Florida perils so far this year, with the state’s larger carriers particularly active in issuing catastrophe bonds. 

Howden Re says many reinsurers last year reported their best financial results in decades based on combined operating ratios, return on equity and economic value added, and some have started to refocus on property risks, aiming to grow in peak zones. 

But a potentially active Atlantic hurricane season has been forecast for this year, loss estimates from Hurricane Ian have risen and challenges persist at lower layers.